Flash Update – January 27, 2021

Published on
January 27th, 2021
Duration
3 minutes


Flash Update – January 27, 2021

Insider Talks ·
Featuring Raoul Pal

Published on: January 27th, 2021 • Duration: 3 minutes

Raoul Pal provides a quick flash update to express that something odd seems to be occurring in markets right now that could lead to a major clearing event. He mentions that bonds are falling, the dollar is rising, gold is not trading as it normally would, and crypto is not trading well. With how “toppy” markets seem, he explains how he’s adjusting his position in order to protect his earnings and provide some equity downside exposure.

Comments

Transcript

  • TP
    Tillman P.
    6 February 2021 @ 02:23
    Did you all catch Julian's body language during the last minute of the video? Primitive anxiety!
  • JL
    Johan L.
    30 January 2021 @ 16:42
    what do you think about a quarter of a billion in short positions on bitcoin? https://www.youtube.com/watch?v=h1n1gF73Z4g
  • PV
    Peter V.
    30 January 2021 @ 02:24
    Hi Raoul, thank you for this update....would you add to your TLT & Eurodollar calls here at the same levels per your 21st-Oct'20 note? Much appreciated.
  • NH
    Nathan H.
    28 January 2021 @ 13:55
    I went to purchase some SPY March 350 puts but one costs $5000 USD. Is there any way I can get SPX downside exposure options and spend a bit less?
    • IO
      Igor O.
      28 January 2021 @ 17:29
      vix calls
    • MC
      Melvin C.
      28 January 2021 @ 20:47
      XSP is the mini-spx index option. It has 1/10th of the notional size of SPX. Or how about a lower strike? you'd be getting more vega than gamma than in Raoul's trade though.
    • JL
      J L.
      29 January 2021 @ 03:41
      5000$ would be 50 bucks for a 350 put, got sth wrong there
    • JW
      Jason W.
      29 January 2021 @ 22:46
      As per melvin but as the futures "mini" version, the S&P mini futures puts are what I purchased. ESH21 Quarterly options
  • RM
    Ritwik M.
    29 January 2021 @ 04:45
    Thank you for this update Raoul
  • DD
    Donal D.
    29 January 2021 @ 03:40
    I've taken out some March Puts using SPY as a proxy as I cant trade the futures. I have a question as to gross exposure which I'd appreciate if more experienced options traders can provide some input on. (BTW I know my real or financial exposure is limited to the upfront premium I pay) If SPY is currently trading at $375 and I but 25 contracts is it fair to say that the gross equity exposure is calculated as follows? ( 375* 100* 25) =$ 937,500 FYI I'm trying to calculate the gross equity exposure so I can compare it to my overall equity positions. Appreciate any inputs Thanks, Donal.
  • HB
    Heini B.
    28 January 2021 @ 17:02
    The multi-strats are in trouble, remember Aug 2019?
  • GB
    Gary B.
    27 January 2021 @ 16:44
    Is there a preference on the date in march for the 3500 puts?
    • RP
      Raoul P. | Founder
      27 January 2021 @ 17:30
      March 21st but any are fine.
    • BF
      Brad F.
      27 January 2021 @ 17:33
      Stick with the monthlies. They are more liquid.
    • GB
      Gary B.
      28 January 2021 @ 14:26
      Thanks for the help with this. Your service is invaluable. I can't thank you enough for all of the education.
  • MC
    Mike C.
    28 January 2021 @ 02:02
    Hi Raoul, you may well be right (god knows you are overdue a macro win ex-crypto) but even so for what we are paying for the Pro service I expect and I think we all deserve more than just your "spidey senses". Can you offer a more process driven view with data like market positioning, RoC of vol, cross asset correlations etc? Bond yields are not falling in a straight line in fact US10yr yields rose faster from 99bps on 6Jan to 118bps on 12 Jan than in this retracement back to 100bps. The Move index is still only at 44. Did you notice VIX spiked to 37 and VXN to 39 today? Not mentioning the big spike in equity vol today makes me wonder about your process. You may be right this time, especially since Julian (who has a research team and quant process) has a similar opinion about a correction. It's my duty to say this as a paying subscriber and I hope you don't take it personally since its just business. The crypto stuff though is awesome so thanks for that. Good luck. M
    • RP
      Raoul P. | Founder
      28 January 2021 @ 11:12
      Did you read my last update? It was all in there...
  • AG
    Alexander G.
    28 January 2021 @ 04:25
    How do you go about sizing a position like this? If this is to hedge against equity prices falling, is there a formula or rule of thumb that you would want to put, as an example, $1 into the puts for every $10 you have in equities? I understand there is a risk of losing the premiums. I am looking for a way to quantify how the professionals in the room, of which I am not, would go about sizing their position.
    • Dv
      Daniel v.
      28 January 2021 @ 10:52
      Started with a 0.70% of portfolio. Will add some as market drops.
  • CS
    Charanjit S.
    27 January 2021 @ 21:47
    I purchased put options on an a SPDR S&P ETF to capture the sentiment of the trade. However, when option RP mentions buying put options at a specific point level - I'm assuming this type of trade is not available to retail investors.
    • CS
      Charanjit S.
      28 January 2021 @ 02:59
      Ans: SPX options and MES options use points as the strike price. https://www.cmegroup.com/activetrader/webinars/micro-emini-options-video?utm_source=cmegroup&utm_medium=cmegroup&utm_campaign=micro_options_institutional
  • YL
    Yongzhao L.
    27 January 2021 @ 19:25
    Hi Raoul, thanks for the timely update! I want to pick your brain on how you chose March as the time horizon on this trade if you feel the market is topping out soon. Wouldn't buying a put vertical spread expiring in mid-Feb be a better risk-adjusted trade? That way the premium paid out is much lower.
    • RP
      Raoul P. | Founder
      27 January 2021 @ 23:08
      I dont like to complicate things...
    • MS
      Mark S.
      28 January 2021 @ 01:44
      Not a fan of vertical spreads in a falling market when the vol is exploding. You're cutting yourself short by the short end as you are short vega.
  • MS
    Mark S.
    27 January 2021 @ 22:11
    3 days ago I went a bit farther out going with April 3300 on the ES. This morning I picked up some Feb at 3300 on the ES, but smaller position to capture gamma. Both doubled just today so good call. Raoul. BTW can you share your Alt purchases with the Pros? If I had to guess you picked up some Decentraland and maybe Horizen
    • MS
      Mark S.
      28 January 2021 @ 00:54
      I forgot to add. I also bought a few puts on bonds.
  • JL
    Johan L.
    27 January 2021 @ 17:02
    does this mean Bitcoin down to usd 28,000? or usd 18000?
    • RP
      Raoul P. | Founder
      27 January 2021 @ 17:30
      25k would be the lower end of the range for me... wouldn't change my view, just push me to add if I could. Might not even get there.
    • SC
      Sanjeev C.
      27 January 2021 @ 18:17
      Descending triangle on BTC, if confirmed on close -- points to ~20K
    • JF
      Joao F.
      28 January 2021 @ 00:09
      The 20w ema is at around 21k currently, being the support for the bull market as it was in he previous cycle.
  • np
    nick p.
    27 January 2021 @ 23:38
    nice update! i did take a little starter in spy (not futs), but i have been holding and adding long vol for a week and half now.
  • JS
    J S.
    27 January 2021 @ 20:11
    Thank you for sharing. Contrasting take vis a vis most recent Julian update opening new reflationary trades. Lots to think about. Again thank you and stay safe.
  • AE
    Arash E.
    27 January 2021 @ 16:38
    Crazy town. Stay safe out there.
    • JE
      Jonathan E.
      27 January 2021 @ 19:48
      Totally agree
  • JE
    Jonathan E.
    27 January 2021 @ 19:43
    Thanks Raoul really useful. Increasingly I think the gold and silver trade is further out. It will happen IMO but need NSFR to curb manipulation first - all part of the unfolding story but is medium term! Great opportunity to average in on crypto in the meantime.
  • CM
    Christopher M.
    27 January 2021 @ 18:47
    What strike price?
    • CM
      Christopher M.
      27 January 2021 @ 18:54
      Oh 3500
    • BP
      Brett P.
      27 January 2021 @ 19:19
      I wonder why not lower, that seems like a pretty minor drop.
    • JE
      Jonathan E.
      27 January 2021 @ 19:33
      toe in the water
  • IO
    Igor O.
    27 January 2021 @ 18:52
    I've got UVXY, VXX calls on. Will stick with that then.
    • BP
      Brett P.
      27 January 2021 @ 19:19
      Yeah this seems pretty interesting too
    • JE
      Jonathan E.
      27 January 2021 @ 19:32
      Good call buy GDX on UVXY drop at some point
  • LM
    Lawrence M.
    27 January 2021 @ 18:28
    Thanks. Great to have such a timely flash update.
  • CK
    C K.
    27 January 2021 @ 18:13
    Thanks Raoul - given the high cost of the option, what is the rationale for buying a put rather than selling short. Why not sell with a stop loss just over the all time highs if you feel that the risk is imminent (unlike the much cheaper but less likely GE Dec 21 100 call)? The potential loss from hitting the stop is similar to the option cost, but the potential profit is much higher. Of course there's always the risk that we hit all time high and the stop loss next week and then plunge, which favours the option, but there's also the possibility that S&P drops to 3501 and the option expires worthless... Just wondering.
    • CK
      C K.
      27 January 2021 @ 18:23
      I've just noticed how much cheaper the option was this morning...
  • CF
    Christian F.
    27 January 2021 @ 17:13
    Thank you for the update Raoul. Should we use ES options for this trade?
    • RP
      Raoul P. | Founder
      27 January 2021 @ 17:29
      Any of the SPX versions are fine. ES versions are very liquid.
  • RM
    Russell M.
    27 January 2021 @ 17:17
    much appreciated.
  • AH
    Attila H.
    27 January 2021 @ 16:51
    Thanks Raoul for the update.